The SEC says Rajat Gupta used his corporate board positions to supply confidential information to hedge fund manager Raj Rajaratnam, who is set to go on trial on insider trading allegations.

Reporting from New York — Rajat Gupta's storied business career is a collection of gold-plated milestones: Harvard Business School, the top spot at consulting giant McKinsey & Co., seats on the boards of Goldman Sachs, Procter & Gamble and American Airlines.

But the Securities and Exchange Commission said Tuesday that Gupta, 62, used his corporate board positions to supply confidential information to his friend Raj Rajaratnam, a hedge fund manager who is set to go on trial next week on insider trading allegations. Through a lawyer, Gupta denied any wrongdoing.

In one instance, the SEC said, Gupta tipped off Rajaratnam minutes after the board of Goldman Sachs Group Inc. approved a $5-billion investment by Warren Buffett in the Wall Street firm at the height of the financial crisis, enabling Rajaratnam's Galleon hedge funds to score a quick $900,000 profit.

In all, the SEC said, information provided by Gupta — allegedly including sneak peeks of financial results at Goldman and Procter & Gamble Co. — generated more than $18 million in illicit gains, including losses avoided.

The SEC's allegations, which appear to be the first such accusations against a Goldman Sachs director for work done while on the bank's board, represent the latest black eye for the elite Wall Street firm.

The accusations, brought in a civil administrative complaint, are also a rare blemish for McKinsey, where Gupta spent three decades, rising to the top post. McKinsey regularly tops lists of the world's most respected consulting firms.

"It's as if the winner of the best in show at the Westminster dog show turns out to have fleas," said Lynn Stout, a professor of securities law at UCLA. "It suggests the worrisome possibility that this kind of conduct is viewed as completely acceptable even at the highest level."

Gupta's lawyer, Gary Naftalis, called the allegations "totally baseless," noting that Gupta is not accused of receiving anything in exchange for information provided.

"Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder," Naftalis said.

The SEC, however, said Gupta "stood to benefit from his relationship with Rajaratnam" and was an investor in Galleon funds at the time of the alleged misconduct in the summer and fall of 2008.

Naftalis said Gupta lost his entire investment in Galleon by fall 2008.

The SEC's action, which could result in fines against Gupta and an order that he step down from his board seats, is the latest step in the government's sprawling investigation into insider trading at elite hedge funds.

Although several people around Rajaratnam have pleaded guilty, including a former colleague of Gupta's at McKinsey, Rajaratnam has held out for a trial.

McKinsey, where Gupta was managing director until 2003, has honed a reputation as the most prestigious consulting firm by providing guidance to most of the major names in American capitalism — and by keeping corporate confidences.

"He was in a position as the head of McKinsey to have access to enormous quantities of material information," said Therese Pritchard, a former SEC lawyer. Of the alleged leaking of that information, she said, "You just don't know how long it's been going on."

A Procter & Gamble spokesman said Gupta resigned his board seat Tuesday "to prevent any distraction to the P&G board and our business."

Gupta remained on the boards of American Airlines and its parent company, AMR Corp., as well as audio system maker Harman International Industries Inc. and Genpact Ltd., a global outsourcing contractor based in Bermuda whose shares are traded in the U.S.

Spokesmen at American Airlines and Harman said they had no comment.

Genpact, where Gupta is chairman, issued a statement saying he "has made invaluable contributions to Genpact, and has always sought to hold Genpact to the highest standards of integrity and corporate governance."

Gupta gave up his post on Goldman's board last May after being alerted that the government was investigating him.

Long the premier investment bank on Wall Street, Goldman has been under intense public scrutiny in recent years because of its success in turning a profit during the financial crisis, sometimes at the expense of clients.

The SEC accused the firm last spring of selling clients securities that it knew were likely to go bad; the firm settled with regulators by paying a $550-million fine. A Goldman trader is still fighting allegations in the case.

Board members have created headaches for Goldman in the past. Former EBay Inc. Chief Executive Meg Whitman stepped down from Goldman's board in 2002 after it emerged that she had received preferential treatment in stock offerings handled by the bank.

There is no indication that anyone at Goldman knew about Gupta's activities.

Gupta befriended Rajaratnam in philanthropic circles, Fortune magazine reported last fall, and the two tried to start a private equity firm together in 2006.

Since then Gupta has started another investment firm, New Silk Route Partners, and ramped up his philanthropic work with the American India Foundation, the United Nations and a number of American business schools.